Income properties give you the potential to make extra cash, but in order to see a turn around, you have to treat it like a business. Owning income property is another job in itself, so knowing the cold hard facts is crucial before diving in!
You Need a Qualified Sales Representative for the Job
You want a Sales Representative that knows the ins and outs of both property management, as well as income property ownership. If they own, or have owned income properties in the past, you’ve hit the jackpot! Finding an agent that will not only help you make the right decisions, but will be a support system for questions and concerns post transaction, is a huge asset.
Determine What You’re Looking For
Following the selection of your Sales Representative, your next step is property searching. Coming to a decision of what you’re prepared to take on shouldn’t be a quick process. You, as well as anyone else involved, need to think long and hard about this. Like it’s stated above, owning an income property is a second job. Do you have the time and the funds to deal with issues that may occur during your renter’s tenancy? Pipes don’t freeze in the summer, toilets don’t clog from 9Am-5PM and not all tenants pay their rent on time, sometimes not at all. The bank doesn’t care if you have a difficult tenant, all they ‘re worried about is your mortgage payment and that it’s on time!
Once you’ve determined the type of property you’re interested in, inform your Sales Representative and let them do what they do best, find you exactly what you want! Being completely transparent with your Sales Representative is a must. They can only help you to the best of their ability if they know your likes, dislikes, and your max and min budget.
Get Familiar with Your & Your Tenant’s Rights
Wing it? Not a chance! You will need to know what legal rights you have, as well as the rights of your tenants. The Residential Tenancies Act has everything you need to know! As I mentioned above, having a Sales Representative that owns, or has owned, income properties in the past is an asset…And you can bet your bottom they’ll be there to help with any questions you may have in this regard. The more you know now, makes for less surprises later.
Time to Determine What You Will Charge Per Month
Once you have completed the buying process and legally own the property, it’s time to determine what you will charge for rent. There are many things you need to take into account when finalizing the number, and researching the current market is a must. Some factors that affect monthly rental costs besides the market and economy are:
- Location – Is the rental located in an urban neighbourhood, close to amenities, transit routes and schools?
- Unit Size – The size and number of bedrooms play a huge part in determining price
- Desirability – Is it a basement or ground floor unit? Is there on site laundry, new appliances, shower only, etc?
Your goal should be to be as competitive as possible, based on the factors listed above and the rates of other rentals in the same area.
Advertising Your Property
What’s great about social media is the FREE ADVERTISING! You can post your property as many times as you like, have your friends share it, and bam! It’s out there for public viewing. There are even groups made specifically for this on Facebook. Renters flock to these platforms daily, if not hourly, looking for housing, so why not take advantage!
Another perk about advertising on these platforms is that you can do somewhat of a soft background check on potential tenants! You wouldn’t believe how easily you can feel out a person by looking at his/her social media accounts.
Don’t forget about the buy/sell sites, although, you will want to proceed with caution. You never know who you’re really talking to until you’re face to face. Bringing a friend or family member with you to viewings is a good idea.
Choosing Your Tenants
This is the last step before you officially become a landlord, and it’s probably the most stressful. Follow these tips and it should lead you to the right choice:
- Rental Applications – OREA (Ontario Real Estate Council of Ontario) has a great rental application that you can send potential applicants to fill out online. Send them the link in an email/text and have them fill the form electronically. This also saves you from having to decipher what they have written down by hand. Click here for the fillable PDF.
- Verify Their Income – Call their current and past employers. Make sure to double check that the contact information they gave you is correct and not a number for someone they will have pose as their past or current boss. Unfortunately, people do, do this.
- Why Current? : You will want to know how long they have been employed with this company/business, their rate of pay, whether they hold a temporary or permanent part or full time position.
- Why Past? : Knowing how long they had held their position at their previous job tells you a lot. You want someone that doesn’t hop from job to job and has a steady and permanent flow of income.
- Credit Check – Do they pay their bills on time? Do they have debt? What is their income to debt ratio? This is crucial and worth the small fee! Equifax is a great program that can take care of the following:
- Credit Check
- Background Check
- Social Media Scan
- Free Tenant Review Call
- Call References – There is a field on the OREA Rental Application for references. There are three different references you’ll want to speak with:
- Past Landlord
- Current and Past Employers
- Personal References
Seal the Deal & Enjoy Your Landlord Status!
Signing a Residential Tenancy Agreement (Lease) is so important. Allowing someone to take up tenancy in your residence without a signed contract sets you up for possible problems down the road. It is a good idea to go over the agreement with them as well. Especially to reinforce your property rules. (e.g. No smoking, no pets, do not paint the walls, etc.)
Becoming a landlord can, at times, be awkward and problematic, but there are many things in life that are. For the most part, owning an income property turns out to be a positive and profitable venture and one that you will be happy you took on.